Gray Television Inc (GTN) Q4 2018 Earnings Conference Call Transcript
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Gray Television Inc (NYSE: GTN)
Q4 2018 Earnings Conference Call
Feb. 28, 2019, 11:00 a.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Good morning. My name is Kelly, and I'll be your conference operator today. At this time, I would like to welcome the Gray Television's Fourth Quarter 2018 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the prepared remarks, there will a question-and-answers session. (Operator Instructions) Thank you.
I would now like to turn the call over to Hilton Howell, Chairman and CEO of Gray Television. Please go ahead, sir.
Hilton H. Howell -- Chairman & Chief Executive Officer
Thank you so much, operator. Good morning, everybody. I'm Hilton Howell, the Chairman and CEO of Gray Television. Thank you so much for your time this morning and for joining our fourth quarter 2018 earnings call. I'm delighted to announce that we are joined for the first time by our President and Co-CEO, Pat LaPlatney, who has joined us effective January the 2nd, and he will be with us going forward. As usual, we have our Chief Legal & Development Officer, Kevin Latek; and our Chief Financial Officer, Jim Ryan, both with us this morning.
And I'll ask Kevin to provide a quick disclaimer before we begin.
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
Thank you, Hilton, and good morning, everyone. Certain matters discussed on this call may include forward-looking statements regarding, among other things, future operating results. Those statements are subject to a number of risks and uncertainties. Actual results in the future could differ from those described in the forward-looking statements as a result of various important factors. Such factors have been set forth in the company's most recent reports filed with the SEC and included in today's earnings release. The company undertakes no obligation to update these forward-looking statements.
Gray uses its website as a key source of company information. The website address is www.gray.tv. We will also post an updated investor deck to the website within the next two weeks.
Included on the call will be a discussion of non-GAAP financial measures and, in particular, broadcast cash flow, broadcast cash flow less corporate expenses, operating cash flow, free cash flow and certain leverage ratios. These metrics are not meant to replace GAAP measurements but are provided as supplements to assist the public in their analysis and valuation of our company. We include reconciliations of the non-GAAP financial measures to the GAAP measures in our financial statements that are made available on our website.
And I now return the call to Hilton.
Hilton H. Howell -- Chairman & Chief Executive Officer
Thank you, Kevin. The big news, of course, is that Gray closed its acquisition of Raycom Media at the beginning of the year. The bad news is that we're just going to be talking about Gray heritage at this point. But even better news is before we discuss our transaction, the milestones that we hit in the fourth quarter were outstanding.
Our revenue for the fourth quarter of 2018 was $328.2 million or plus 40% from the fourth quarter of 2017. Importantly, this was our all-time best quarterly revenue hit ever. Our net income for the quarter was $88.3 million and was our second best fourth quarter net income. Our broadcast cash flow was $172.8 million, which was double that in the fourth quarter of 2017. This was our all-time best quarterly broadcast cash flow result.
Our political advertising revenue was $83.2 million, which was about 5% higher that our political revenue in the fourth quarter of 2014, which was the most recent non-presidential election year, after giving effect to stations acquired and divested between 2014 and 2018. This was our highest fourth quarter political revenue in a non-presidential year ever.
Our gross retransmission revenue for the fourth quarter was $93 million, and our net retrans revenue was $50.3 million. Both of these figures also saw -- set new quarterly records for us. For calendar year 2018, gross retransmission revenue was $355.4 million and net retrans revenue was $190.4 million.
Finally as of December 31, 2018, our total leverage, as defined in our senior credit facility, was 3.01 times on a trailing eight-quarter basis after netting out our total non-restricted cash balance of $667 million.
In short, the fourth quarter of 2018 was an excellent quarter once again across the Board. Given that performance and even before considering that we had nearly doubled our size with the Raycom acquisition, I believe that our stock remains deeply undervalued.
On the yields of the fourth quarter momentum, we completed our acquisition of Raycom Media on January the 2nd, and made it effective as of January the 1st, so that we could begin this year with a clean break from legacy Gray. As you know, upon closing, we owned and/or operated television stations and leading digital properties in 91 television market from Alaska and Hawaii to Maine and Florida. This portfolio includes the first or second highest rated television stations in 85 markets. Collectively, our television stations portfolio broadcast roughly 400 separate program streams.
Closing the Raycom deal was no easy deal, and I want to take a moment to acknowledge literally heroic (ph) efforts that I witnessed in the fourth quarter of 2018. Remember, we set the ambitious goal of completing multiple complex closings simultaneously in addition to the actual acquisition of Raycom. Those included financing transactions, the spin off of Raycom's newspaper and ad rep (ph) businesses, several television stations with four different broadcasters and internal reorganization of both personal and corporate subsidiaries. And we made all that happen over the holidays.
Gray's shareholders were clearly well served by the extreme dedication, sacrifices, and professionalism of all the countless people who made this all look easy. I want to publicly thank my colleagues at legacy Gray and legacy Raycom, as well as the many others at the divestiture buyers, and the professionals assisting all these company at the banks, law firms and accounting firms that have been involved in these transaction. They worked truly heroic.
Our new scale will give Gray the opportunity to face the dynamic changes in our industry and local communities with new vigor and added resources. A great example of the new opportunity before us is this morning's exciting announcement that Greta Van Susteren has joined Gray as our Chief National Political Analyst. On a personnel and professional basis, I'm thrilled will this.
In this new role, she will provide our local newsrooms in 93 markets coast to coast with the expert, unbiased, professional coverage of national and international development that has been the hallmark of Greta Van Susteren's distinguished journalism career. While I cannot provide details today, we can confirm that Greta also has two nationally syndicated shows in development with Gray.
Over her long career on cable news channel, Greta has distinguished herself as a journalist first. She is known for her knowledge, experience and unbiased approach to the controversial issues of the day. As such, we have found a trusted, respected expert on national and international affairs to complement the trusted, respected professionals in our local news rooms and cities and towns across this country. Her decision to join Gray from among all the many other quality news operations out there reaffirmed that our investments in quality local journalism and service to local community does in fact pay off.
At this point, I'm very happy to introduce Gray's shareholders to our new President and Co-CEO, Pat LaPlatney.
Pat LaPlatney -- President & Co-Chief Executive Officer
Thank you, Hilton, and good morning, everyone. I'd like to echo Hilton's comments regarding the extraordinary effort on the part of all Gray employees and our professional partners to close the agreements. Tremendous amount of work has been accomplished in a remarkably short amount of time. We've amended our agreements with both Nielsen and Comscore resulting in significant cost savings for the company. And as of today, we are now handling all national business in-house which will provide our stations with revenue upside to put a huge dent in our cost of sales.
Jim will talk in greater detail about the synergy effort, but I can tell you that we are well on our way toward the stated goals. We are also moving forward on revenue development efforts in a number of areas, and expect to see progress throughout 2019. Again, Jim will cover the numbers in detail. The Q1 has been OK with market showing an uptick. We have a sizable Olympic revenue number from February 2018 because of our large NBC footprint, and that's impacted our comps in first quarter. It's still early, but we are hoping that momentum for March swings in the second quarter.
With that, I'll turn it over to Kevin for his update.
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
Good morning, again. We all certainly kept pretty busy in the fourth quarter, not just with the Raycom and related transactions, but also our core business, political coverage and political sales. As luck would have it, Gray had very few retransmission consent agreement expiring at the end of 2018, accounted for roughly 1% of our total stock. Still, as usual we concluded those renewals in very satisfactory terms without any disruption.
Going forward, we anticipate having about 22% of our MVPD sub under contract, expiring around the end of 2019 with 56% of sub under contract expiring around the end of 2020, and the balance expiring again at the end of 2021. We saw in our release today that we are also guiding to a 22% increase in gross retransmission consent for this quarter and 20% for the year. I'll also note that we had some delay in reports on OTT subs, that appears to be across 1.25 million OTT subs around the first of this year.
Those following Gray for the past few years know that most of our network affiliation agreements have been scheduled to expire at some point in 2019. In the fall of 2017, we announced that we had extended the terms of all of our affiliation agreements with CBS regardless of expiration date. Similarly, we announced in the fall of 2018 that we had extended the terms of all of our affiliation agreements with NBC which have been expired --scheduled to expire at year-end 2018.
Shortly after closing the Raycom transaction, we announced that we had extended the terms of all of our affiliation agreements with ABC for all of our legacy Gray and all of our legacy Raycom stations. Most of those contracts have been scheduled to expire at year-end 2018.
This morning's release announces that we also recently extended the terms of all legacy Raycom affiliation agreements with CBS. So we're off to a very good start. We have one major network of expiring affiliation agreements this year and that negotiation of course is already under way.
Turning to M&A, we have said consistently for many years that we look at all number one and strong number two ranked television stations offered for sale regardless of market size. The Raycom transaction has not sent us the third one, indeed we recently entered into an agreement to acquire the United Communications' television stations in Watertown, New York and Mankato, Minnesota for $45 million. These are terrific stations that will fit very well into our portfolio of similar stations which mainly represent service to the local community. Moreover, we anticipate that the transaction will be of risk leverage neutral and certain opportunities can be executed as we hope and expect United Acquisition can be a deleveraging transaction for us.
We are continuing to look at opportunities to grow the company to more small tuck-in transactions like United, potentially larger acquisitions of high quality stations, and some non-broadcast complementary ventures. In our cases, we will continue to be guided by our public commitment to grow the company prudently within the limits of our balance sheet.
Thank you for your time. I'll now turn the call over to Jim Ryan.
James Ryan -- Executive Vice President & Chief Financial Officer
Thank you, Kevin, and good morning, everyone. Hilton already said fourth quarter and full year 2018, we're very pleased with. Obviously 2018 was a record-setting political year for us, and we think that bodes very well for 2020.
Turning to our first quarter guidance, I'm going to focus my comments on the combined historical information that we put out for Q1. I would also point out that in the 8-K that was filed a little earlier this morning, there is an exhibit, where certain select combined historical revenues and certain select operating expenses for 2018, 2017 and 2016 has been published by quarter, so that should help everybody with their modeling. And I will remind everybody that combined historical does not include expected synergies of any transaction. It is nearly the combination of the historical record adding in acquisition and subtracting our divestitures.
Also our guidance for Q1 does not include the two United stations that we will begin operating tomorrow under a pre-closing LMA. So stations rather great stations, very powerful in their local markets, we're delighted to be acquiring them, are not material to the quarter or to any (inaudible) operations.
Our core local and national is expected to be down in the mid-single digit range, but as Pat mentioned a moment ago, we have $12.7 million of total local and national revenue in the Winter Olympics last year, which we're going again. And in that $12.7 million, we had $3.6 million of auto-related advertising. So, it clearly is a significant event for us in 2018 which does affect our ability a little bit for our 2019 Q1. However, if you exclude the Olympics, we would expect our core local and national to be approximately flat in Q1 2018.
We are very pleased with the anticipated growth in retrans revenue of a low 20% range. Remember that legacy Gray and legacy Raycom Gray, as Kevin just said, a very few MVPD subs to renegotiate, and we commented before that the Gray's NBC contract, the annual escalator is generally a low double-digit percentage. So we are very pleased that our overall retransmission growth in Q1 will be up 22% to 23% gross revenue, retrans revenue, and that obviously is reflecting the synergies that Gray (inaudible) for the legacy Raycom stations.
We are reaffirming our previously announced net retrans synergy of at least $15 million versus prior year. Our broadcast expenses in Q1 have two significant components. First, there is $33 million to $34 million in nonrecurring expenses associated with the Raycom transaction, including $27.6 million of expense to terminate the national Raycom (ph) and about $5.3 million of severance or other compensation-related expense in the broadcast expense line.
Second, as Kevin mentioned, our NBC agreements repriced under the new agreement, effective January 1. Retrans is expected to grow quarter-over-quarter $19 million to $20 million. If you exclude both of those items, then our broadcast operating expense in Q1 would be essentially flat to Q1 2018 on a combined historical basis. Similarly, our corporate expenses in 2019 are impacted by transaction-related expenses of $29 million to $30 million, again that is M&A advisory fees, legal and accounting fees, severance and other transaction related compensation, which would be non-recurring. If you exclude those non-recurring charges, again our corporate expense will be approximately flat to 2018 on a combined historical basis.
I would like to give some updates on pro forma leverage for 2018. We have not yet completed the preparation and audit of carve-out statements for Raycom for the year ended 12/31/18. Therefore, my following comments are on a preliminary basis based on internal forecast and do not reflect the ordnance table.
That being said, outstanding debt, post closing was $3.97 billion as of 12/31/18 or would have been. We estimate our cash on hand as a growth, it would have been about $200 million. On a trailing eight quarter basis, as of 12/31/18, our operating cash flow as defined in our senior credit facility, we estimate would have been in a range of $780 million to $795 million. That's higher than when we announced the deal last year, and obviously that had in part reflecting very, very strong political we saw in the second half of the year of 2018
On a trailing 12 month basis, the operating cash flow would be in a range of approximately $880 million to $900 million. Those cash flow estimate do include the impact of the $80 million of synergies we announced -- when we announced the deal, and I'll update you on synergies among.
With these results in perspective, if you look to our November investor presentation that is on our website, our operating cash flow combined historical with synergies for 2016 was approximately $803 million, and in 2017, it was about $686 million. Our leverage ratio at 12/31, we are currently estimating would have been somewhere between 4.85 times and 4.75 times. If you recall, when we announced the deal, we said we would be approximately five times the net announcement with last Q (ph). When we closed the deal in January, we said we will be between 5 times and 4.75 times. And clearly our expectation would be toward the lower end of the range, closer to 4.75 times. And again that leverage ratio reflect the synergy number.
We currently estimate free cash at December 31 would have be in a range of $500 million to $525 million. Again if you go back to our investor deck for November, it's on our website, 2016 free cash was estimated at about $401 million, and 2017 free cash was about $300 million. So we're very, very pleased with where we are at the outset of 2019. Our common stock outstanding is approximately 100 million shares outstanding for both the GTN and the GTNA on a combined basis.
Now let me update you on our synergies. We had said at the outset that we expected $80 million of synergies. Today, eight weeks and post closing, we are at $61 million that's been essentially locked in. That $61 million represents $22 million of payroll benefits. We already either eliminated or have scheduled, we will eliminate a 135 positions across the entire combined company. Also given changes to benefit plan, we will have an additional approximately $4 million of cash savings from a benefit plan changes.
For contractual arrangements, we have savings of $18 million to $20 million that would reflect the annual run rate of the former national rep (ph) commission and it will reflect the ratings (ph) and renegotiating the Nielsen and Comscore agreement on very favorable price in terms of Gray.
Our net retrans, we're very comfortable that we'll have a net retrans uplift of at least $15 million. In addition, the legacy Raycom aircraft unit has been closed down saving approximately $2 billion a year, and the planes have been sold with net proceeds of approximately $2.7 million. So I would say that, first of all, those expenses, those savings with synergies will all be realized ratably as we go through the year. We, I think, are off to a very good start at $61 million, about 75% of our goal. There will be other opportunities for us as we progress through the year, and you know, we will not be bashful about taking every opportunity that we can uncover.
So at this point, I'll turn the call back to Hilton.
Hilton H. Howell -- Chairman & Chief Executive Officer
Thank you, Jim. At this time, operator, we'd like to open up the lines for any questions anyone may have.
Questions and Answers:
Operator
(Operator Instructions) Your first question comes from Marci Ryvicker from Wolfe Research. Please go ahead. Your line is open.
Marci Ryvicker -- Wolfe Research -- Analyst
Thank you. You spent a lot of time on the gross retrans number and the synergies, can you remind us what the net retrans guide is for -- is it still low single-digit year-over-year growth?
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
Hi, Marci, it's Kevin. Again reminding, we have not said anything yet, our net retrans for the year, we still have one network that we have to negotiate our terms that current -- all those current agreements expired in the middle of the year. We don't know where they're going to land on that renewal. So therefore we don't know what the reverse is going to be this year.
As we've been telegraphing with all of the contracts, the other big three contracts mostly expiring in 2019, and being repriced in '19, there will be a -- there is a larger than normal step-up in reverse comp this year just because of the timing of all those network contracts. So, last year, I would say, obviously a good year. This year margins going to be a bit compressed, but our growth is probably higher than a lot of people expected this year. But we're not ready to give a guide for this year just yet.
Marci Ryvicker -- Wolfe Research -- Analyst
Okay. And then the free cash flow, the $500 million to $525 million that you would estimate for 2018. Is there anything one-time in that that would not occur in 2019 or 2020 like taxes?
James Ryan -- Executive Vice President & Chief Financial Officer
Just to be clear on that, I am not counting any one-time cash payments for instance the $27-plus-million of national rep termination fee in that number which is non-recurring. But it would include in estimate for taxes for 2018 that would be -- what would -- we would appear -- what appears us to be a normal run rate in taxes. There were no taxes directly linked to the transaction itself.
Marci Ryvicker -- Wolfe Research -- Analyst
Okay. So then, would it be safe to think that 2020 would grow above that?
James Ryan -- Executive Vice President & Chief Financial Officer
Yes. Obviously, that's going to depend on where political lands in 2020, but I would expect our gross retransmission will obviously grow especially we reprice 24% of our sub base at the end of this year. So I would say 2020 is going to be a very strong free cash flow year for us.
Marci Ryvicker -- Wolfe Research -- Analyst
Great. Thank you so much.
Hilton H. Howell -- Chairman & Chief Executive Officer
Marci, it is good to have you back.
Marci Ryvicker -- Wolfe Research -- Analyst
Thank you.
Operator
Your next question comes from Aaron Watts from Deutsche Bank. Please go ahead. Your line is open.
Hilton H. Howell -- Chairman & Chief Executive Officer
Hello, Aaron.
Aaron Watts -- Deutsche Bank -- Analyst
Hey, thanks for all the detail today. Couple of questions from me. I guess first on the core advertising environment, can you maybe talk a little bit more about the cadence you saw post election in November-December into the first quarter and maybe just broadly some goalpost around what you see core doing in 2019?
James Ryan -- Executive Vice President & Chief Financial Officer
I'm going to look up. I can give you a number for December, just give me a second to pull it out of my (inaudible). And maybe I'll let Pat start with --
Pat LaPlatney -- President & Co-Chief Executive Officer
Sure. I mean, look I can speak for legacy Raycom in general. We did see some momentum in fourth quarter. We were pleasantly surprised by that. And again our first quarter is OK. When adjusted for Olympics, it's better than OK. And we are seeing some momentum in March, probably a function of early second quarter starts, which will happen this time of year. But candidly, it's really too early to give any further guidance for Q2 and remainder of the year in my opinion.
Aaron Watts -- Deutsche Bank -- Analyst
Just given that it's such a big piece of a pie, any insights you can give on what you're seeing in the auto category?
James Ryan -- Executive Vice President & Chief Financial Officer
Yes. I can speak to that a little bit. Again, we had about $3.6 million of auto advertising in the Olympic broadcast last year, so that obviously creates quite a -- it skews comparability a little bit. But when we take that out, I would say our auto is right now in Q1, looking like, it would be down, kind of mid single-digit range, say 4-ish percent, 5-ish percent, some place in there (inaudible) but that again is excluding the $3.6 million of political that -- I mean not political but auto from the Olympics that was really kind of incremental last year.
The other comment I would make in general for auto is we are seeing Ford corporate cut back, and we'll be keeping our eye on that just like Dodge, Chrysler Jeep did last year. It looks like it's Ford's turn this year, but -- and that's probably worth $1 million hit to us in Q1.
Aaron Watts -- Deutsche Bank -- Analyst
Okay, that's helpful. Jim maybe since -- I'll throw one more your way here. You talked about being give or take around 4.8 times leverage, pro forma for the transaction as you ended '18, can you refresh us on where your heads at? Where you see that leverage going over maybe the next year or two years?
James Ryan -- Executive Vice President & Chief Financial Officer
I think it's -- absent any large transaction, I think leverage at the end of '19 is somewhere in the lower 4s and then we're somewhere at the end of '20 comfortably in the 3s.
Aaron Watts -- Deutsche Bank -- Analyst
Okay, perfect. And last one for me. Appreciate the plan. A little bigger picture. We saw a private equity step into this space in the terms of making an acquisition recently. Curious what your view is of that, if it's a one-off situation or you think you'll see more of that, and how does that impact in a bidding environment from a competitive standpoint as you look at assets going forward?
Hilton H. Howell -- Chairman & Chief Executive Officer
Well, the price of poker may have gone up a little bit. We're happy to have (inaudible) we know those guys and they are smart as well, and we are delighted that they see the value that we see in local broadcast, and so we are -- we heartily welcome them to this space and wish them the best with the new acquisition.
Aaron Watts -- Deutsche Bank -- Analyst
Okay. Fair enough. Thank you.
James Ryan -- Executive Vice President & Chief Financial Officer
Aaron, just a quick follow-up. Your December question as far as what's corrugated post election day, is that December was up nice about a 4%, which was very encouraging work.
Aaron Watts -- Deutsche Bank -- Analyst
Okay. Thanks, Jim.
Operator
Your next question comes from the line of Dan Kurnos from Benchmark Company. Please go ahead. Your line is open.
Hilton H. Howell -- Chairman & Chief Executive Officer
Good morning.
Dan Kurnos -- Benchmark Company -- Analyst
Great, thanks. Good morning. Nice to see some recognition of the actual Raycom is getting factored in here. Just looking at kind of your self transmitter, Kevin, I think that's the other piece of the equation. Obviously, you gave really healthy guidance, but we heard that there is some noise at the end of the year. Just what you're seeing from linear and OTT and how that's kind of playing out for you over the balance of the year?
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
I think, it is more of the same. MVPD subs are dropping for everybody. One operator is seeing bigger drop which is probably not much of a surprise given not carrying some marquee programming and are dropping seemingly every broadcaster that they have a negotiation with. So we are seeing -- we're probably seeing some bigger fluctuation. Some of those subs seem to be moving to other operators. And I don't think that trend has changed much recently or will change going forward.
And at the same time OTT subs are growing frankly faster than we expected, 1.25 million OTT subs around the beginning of the year for the whole company, that's a lot more than we expected at this point in time even at (inaudible) Raycom, but still it's not faster than we thought. It's unclear how many of those folks are going to sort of stay where they are or move around given OTT providers, but it doesn't really matter. The economics are decent, and I think we -- I think they were pleasantly surprised at how retrans is doing so far this year.
Dan Kurnos -- Benchmark Company -- Analyst
Got it. Thanks, Kevin. That's helpful. And then, Jim, I know you never like to go out on a limb on political, but maybe just at least for the off year, I think, if I'm looking through the K you did $31 million or so on CHP '17. So obviously you're starting a little lower and it will probably be back-end weighted, just any thoughts on how political could pace this year?
James Ryan -- Executive Vice President & Chief Financial Officer
I think it somewhat looked like '17 although I'm trying to recall, I think we had in the '17 cycle, maybe a little bit more off year here Governor's races that we do in the '19 cycle. So that might muted a little bit, but you're right, it will be very, very heavily back weighted. And it's not -- no matter what, it's just not going to be a big number this year because it's an off year for us. And there's no -- at least right now, there's no huge catalyst. But having said that, while the dollars is just still pretty small, we've actually gotten two 2020 presidential orders in Iowa already this year.
Hilton H. Howell -- Chairman & Chief Executive Officer
Yes, I was about to say, when Jim was talking about that, our company to my memory, and I've been around almost 30 years now, we have never gotten presidential ad money this early in the cycle. And for us to have presidential ad money at this point, I think it's going to be literally just raining money in 2020. And all of our states (inaudible) Gray happily, we win essentially every battleground state that is defined by 538 in the country, and literally everyone. And I don't think the Democrats are doing that one mistake in terms of ignoring Wisconsin, Michigan, and in the rest of those areas that are so important in 2020. And I think the Republicans, you're not going to have like we had with the last presidential election here, the President sitting back, thinking that celebrity can win him the election. He's sitting on a huge war chest right now and I think 2020 is going to be gargantuan in my opinion.
Dan Kurnos -- Benchmark Company -- Analyst
Well, fair enough. I guess we shall see. Thanks for all the color, guys.
Operator
Your next question comes from the line of Michael Kupinski from NOBLE Capital Market. Please go ahead. Your line is open.
Unidentified Participant -- -- Analyst
This is (inaudible) for Michael Kupinski. Raycom had a fairly developed program on with a decent amount of original programming, outside of news content. Can you give us some color on your plans for those operations? And given the much larger platform that you will have with Raycom, does the company plan to move to a more fully developed original programming moving forward?
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
Yes. We just made a big announcement yesterday with Greta. So that's one project. Candidly, I don't see a bigger move into originals although as you know, we do have production companies in our portfolio, which gives us capabilities. But in terms of growing originals through syndication, there will probably be some of that, but not a huge focal point right now.
Hilton H. Howell -- Chairman & Chief Executive Officer
But I will say, we are very proud of the production companies that Raycom brought to our portfolio, while in comparison to the size and the cash flows and the revenue that's generated from our television station portfolio, it's relatively small. Each and every one of them is substantially profitable, and they turn out outstanding products just really across the board from Raycom Sports to Tupelo-Raycom, to RTM Studios, to slow-film here in Atlanta. They are assets that Gary is proud to own. And we look forward to explaining their unique niches to you in the future, because it is an added area for growth. At some point, all the TV stations in the world are going to be bought out. And we'll have to look at other areas to grow our business. And that's given us a great foothold in that regard.
Unidentified Participant -- -- Analyst
Great, thank you very much.
Operator
The next question comes from the line of Steven Tiegel from Royal Bank of Canada. Please go ahead. Your line is open.
Steven Tiegel -- Royal Bank of Canada -- Analyst
Yes, thank you. I was may be wondering, if you could talk a little bit more about the one big for renewal you haven't done yet. That company is also going through some transformative M&A, and I wondered if that at all impacted the way they're coming to the negotiating table? And then also on the pro forma free cash flow numbers that you gave, does that give your future cash interest expenditure as we think about kind of forecast 2019, do we need to build in a little bigger cash interest expense, given the debt you've just raised? Thank you.
Hilton H. Howell -- Chairman & Chief Executive Officer
I'll take the first question, on the other renewal, I mean, I'm not seeing anything particularly different than what we've talked to them about in years past. So that conversation started a little slower than others, which is not a surprise, and there's a lot of important markets there, and we'll get through it. But there's nothing that we've seen that is really all that different than what we've seen in the past renewal. Jim, do you want to?
James Ryan -- Executive Vice President & Chief Financial Officer
Yes, if you take our current capital structure now and go through the different tranches, you make some assumptions on LIBOR. Current LIBOR rate is about $220 million, $225 million per year, and then obviously there is the preferred dividend now to $52 million a year and both of those are taken into account in the free cash that I was talking about.
Steven Tiegel -- Royal Bank of Canada -- Analyst
Great. That's very helpful. Thank you.
Operator
(Operator Instructions) Your next question comes from the line of Jim Goss from Barrington Research. Please go ahead. Your line is open.
Jim Goss -- Barrington Research -- Analyst
Thanks. I was wondering with the grid of ancestor in the programming, are you planning on making that a great exclusive role, will that be syndicated to others, and we'll then tie-in to your efforts to sell political ads in the coming years?
Hilton H. Howell -- Chairman & Chief Executive Officer
We will make an effort to syndicate it and sell it to others. We will obviously and we have already identified clearances within all really 93 of our markets for space on Sunday, but we will be looking for syndication.
Jim Goss -- Barrington Research -- Analyst
Okay. And will there be a political ad placement on that as well, so that's one of the benefits of having this sort of a person?
Hilton H. Howell -- Chairman & Chief Executive Officer
Yes, Jim, Greta is joining our news operation right now. We're talking about some shows that we would plan to naturally syndicate, but we don't have details on what those shows maybe or what would be in them, but right now she has joined us as an analyst, and she will be appearing on our local newscasts as soon as this afternoon.
Jim Goss -- Barrington Research -- Analyst
Okay. And the switch to Comscore from Nielsen, I wonder if you could talk a little bit more of the value you expect to bring from that, maybe the rationale behind it? I think you're not the only one to have done that?
Hilton H. Howell -- Chairman & Chief Executive Officer
I'll let Pat talk with an operational standpoint. I will say that we have had a lot of frustration with our other service, particularly in the dairy market. And lot of markets -- many markets we had both Nielsen and Comscore, and we were able to see -- and basically compare the two for significant period of time and Comscore data, which as you know comes from many more data sources, data points and dairies. We're much more stable, much more responsive to what we were seeing in the news, and only in the market and what was on television. I remember showing up on diaries. And despite the conventional wisdom, (inaudible) tell you all of our stations do better in Comscore than they do in Nielsen anyway. So from that perspective Comscore's stability was very important to us. But I'll let also Pat add some.
Pat LaPlatney -- President & Co-Chief Executive Officer
Yes, sure. So, legacy Raycom effectively had -- we had moved to Comscore in the diary markets I think three years ago, so this really is a big change. We still work with Nielsen in larger markets and we've consolidated Comscore in the diary markets.
Jim Goss -- Barrington Research -- Analyst
Will that also give you better information to justify any improvement in pricing power in those markets? Is that part of the rationale?
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
It's not part of the rationale.
Jim Goss -- Barrington Research -- Analyst
Okay. And lastly, capital allocation priorities. What is the rank order of your desires and plans?
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
We had talked -- we announced Raycom, we said our number one priority was to close Raycom, and after that we would put a focus on bringing our debt down, but still keep an eye open for smart acquisitions that made sense for us. Nothing has changed in that regard. So right now we are focused on paying debt down as we get to a different level, not to get ahead of the Board, but we anticipate that we'll be looking again in capital allocation returns to shareholders. But I don't have any -- I have nothing reported this time, and again that will be our Board's vision. But we said since Raycom closing that our focus will be paying debt down once the deal closes, which is now our focus.
Jim Goss -- Barrington Research -- Analyst
All right. Thanks very much. Appreciate it.
Operator
And there are no further questions at this time, I will now turn the call back to the presenters for closing comments.
Hilton H. Howell -- Chairman & Chief Executive Officer
Well, I just want to take a moment to thank everyone of you for joining us this morning. We have a lot of exciting things ahead. We're thrilled to be bringing all of the professionals, Raycom and all of their operating units within the new Gray umbrella, and I think it's going to lead to remarkable results in our future quarters and for the year, and we look forward to sharing with you in the next quarter. Thank you very much for being here this morning.
Operator
This concludes today's conference call. You may now disconnect.
Duration: 44 minutes
Call participants:
Hilton H. Howell -- Chairman & Chief Executive Officer
Kevin Latek -- Executive Vice President, Chief Legal & Development Officer
Pat LaPlatney -- President & Co-Chief Executive Officer
James Ryan -- Executive Vice President & Chief Financial Officer
Marci Ryvicker -- Wolfe Research -- Analyst
Aaron Watts -- Deutsche Bank -- Analyst
Dan Kurnos -- Benchmark Company -- Analyst
Unidentified Participant -- -- Analyst
Steven Tiegel -- Royal Bank of Canada -- Analyst
Jim Goss -- Barrington Research -- Analyst
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